Harder for FTSE 100 firms to justify steep fee rises, says PwC
Non-executive directors in FTSE 100 companies are seeing the end of a series of pay increases sparked by the financial crisis, according to a new report by PwC.
Fees for non-executive directors have been on an upward trend for the past five years, as the regulatory nature of the role expanded in the fallout from the recession, said the professional services firm.
However, pay rises were now “beginning to plateau”, found PwC’s latest report.
The median base pay for FTSE 100 chairmen was £361,000 in 2013 – broadly flat compared to the average fee of £360,000 in 2012.
For FTSE 100 non-executive directors, the median base fee was £61,000 in 2013, a slight drop from 2012 where the median was £64,000.
This followed five years of pay growth for both FTSE 100 chairmen and non-executive directors, from a base of £300,000 and £55,000 respectively in 2009. Fees in FTSE 250 companies also continued to rise over the same period, the report said.
“The role of non-executives has changed dramatically since the financial crisis,” explained Fiona Camenzuli, partner in PwC’s reward team.
“The huge increase in risk and regulatory requirements has put non-executive directors firmly in the spotlight and led to many dedicating far more time to the role to properly fulfil their duties. Many non-executive directors felt their pay needed to increase to reflect the time commitment and considerable reputational risk which now accompanies the role.”
But she added that companies were seeking to keep pay increases for executives and non-executives more in line with the rest of their workforce.
“As with executive pay, companies are keen to show restraint in non-executive directors pay by ensuring any pay rises are not out of kilter with their wider employees,” said Camenzuli. “With average employees’ pay increases limited to inflation in many cases, it will be harder for companies to justify a higher increase for non-executive directors.”
However, the research did highlight one area which was not experiencing similar pay restraint.
Non-executive directors who were members of remuneration committees continued to see steep rises in their fees, with the pay for chairmen and committee members in FTSE 100 companies jumping by 65 per cent and 140 per cent respectively since 2009.
The median fee for a remuneration committee member reached £12,000 in 2013, up from £5,000 in 2009. Pay for chairing a remuneration committee grew from £12,000 to £20,000 over the same period – reaching the same level as chairmanship fees for audit committees, the report found.